How many High End studio owners live the High End life?

[Jules]

It just occured me..

Freelance engineers & producers = get their money

Ancliary - mantenance / assitant / studio office staff get paid

While record co's and artist managers ALL whine and groan about prices... and put a gun to the head of the studios for rock bottom prices - how can a high end studio enjoy this 'top position'?

How many high end studio owners really live the High End life?

Are most of them, gear junkies that love owning a studio, love having super stars through their doors and arent so bothered about making a big profit?

[Dangerous Dave]

Jules

I have been thinking about this self same thing, i'd be interested to see what the average turnover of meduim sized studio is in the UK and what is the margin on that turnover.

Given the fact that being a full time a slut is an expensive job, studios can't be making that much cash, especially in todays climate..

Got any pearls to share with us then ? I mean only after you have parked up the Aston on the drive of your georgian mansion....

[MJGreene Audio]

Great question. I have a couple of experiences. In the 90's I worked for a studio in LA. Not the Record Plant or an other "Big Time=Big Ego" studio but one that was very busy and always booked. Between major corporate clients and record labels deciding when they would pay and having to pay employee's salary, lease payments, rent, etc. The two owners regularly had to forgo or delay their own paychecks. I would always blow my mind that some of the biggest ad agency's in the world and the big record labels would take upwards of 6 months to a year to pay. The studio decided to start charging interest on bills that were over three months out. One big agency told our accountant that "It is not our policy to pay interest or late fees" How can you run a business when your clients dictated how they are going to pay? These were very high paying commercial gigs and the studio didn't wan't to loose that revenue, but between that and the record work we did it really put the owners in a rough position.

Fast forward 10 years and I now have my own place. 95% of my work is mixing so my overhead is low compared to a 3000-7000 square foot building but I still have to pay all the usual stuff to stay in business. When it gets slow I go without a paycheck. I would bet that most owners are in the same boat.

I know a bunch of different studio owners who also make royalties because they are either also players or composers, so this helps them when things get tough. Do I make more money when things are busy than I did as just a freelance engineer? Yes by a large margin, and I usually take a large chunk of that a put it back into the company so that I have the tools to remain competetive and so that I can give my clients something they can't get at another studio. It is expensive, and I would love to be driving a new BMW but at least I am working doing what I love and what I am good at. ( so my clients tell me anyway)

Michael Greene

[amorris]

owners have the passion. how many indy race teams make money? at this level, its about passion. any self respecting accountant wouldnt let you spend the money on a studio. if its about money to you, wrong business. hell, if it were a bout money to me, i would do post, but i cant stand the work. the money i would make wouldnt buy the life i have today.

[meat]

Jules,
My last name is Miller and its anything but the HIGH LIFE! I rely on corporate dollars not the latest and greatest passing talents. However thru careful planning and business plans I think we will be just OK! My closest friend just purchased a Mercedes-Benz SLR McLaren super sports car i'm chrecking out the Jetta's.

[Dave Martin]

It even embarrasses ME how little I paid myself last year. And this isn't a 'high end' facility. But bills come first, new gear and constuction costs are second, and making money is something that will happen 'real soon now'.

[alphajerk]

Originally posted by MJGreene Audio
One big agency told our accountant that "It is not our policy to pay interest or late fees"

thats when you say "its not our policy for allowing deliquent payments from you... so pay it now or pay more later" [and hit them with 20% interest after 6 months... or make interest raise by 5% each month its late.]

[Oldone]

Recording is a tax write off business. That's where the ultimate payment lies. So pull out those calculators and pens. That is where the high life resides.

[Oldone]

Most businesses, with strong customer demand, no. They can thrive on cash inflow.

Recording is not one of these types of business. At least the current environment. If you're leading the high life from the profits of this industry, you are part of a very few. Otherwise, you're doing it as a tax write off to offset some other concern. Not long term either, but in the short run, for a start up, it's a viable model.

I was being rather flippant but I look across the terrain of the music business and the vast cash source for most studios has been aspiring talent willing to spend money on demos. That cash source is drying up and today most aspiring talents are using their dollars on their own home studios.

If your building a home studio, as a start up business, you can lose profit 3 out 5 years (last time I checked, this may have changed) and the IRS looks the other way. After that time you either need to make a go of it or get out. So, if you're starting a new studio, tax deductions are viable to get over the equipment hurdle.

So long term no, it's not a viable option but at the start of things, you bet. As to the high life, well there is no high life in my opinion and I would retract that tax write offs will get you there. They can be a tool for trying to get there however.

[meat]

Interesting. So your business plan puts you in the "black", you think? May I ask what your overhead is?

Ive done this for quite a while so rent doesnt exist per say (bought the building and its location is convenient for the corporate clientele) but maintenance does. And I follow the business model to a tee. My overhead gets better the longer I do this and when forums such as this acknowledge start of the art equipment that I have owned for 20 some odd years (excluding upgrades) it compliments my approach. My overhead is smalll in comparison to the coasts I know for a fact. Parallel my commercial work compliments the core business. If I relied on just the music business I probably would have had no need to respond.

[bjm007]

The tax write off "angle" for a studio's existence has been around for a long time, but doesn't apply to all studios. I'd say the "write-off" studio's are somewhat rare and certainly not the norm. At least where the write-off is the driving reason for the studio being built in the first place.

George Benson built a gorgeous studio in Hawaii years ago, as a write off, and it worked out just fine from what I understand. But how many George Benson's are there out there doing that sort of thing?

[Bob Olhsson]

I've never seen anybody get rich off the studio business. The bottom fell out during the late '70s and it never really came back, at least that I heard of.

John Fry at Ardent in Memphis is one of very few original owners from back in "the day" and none that I'm aware of ever left the studio business willingly.

[Jan Folkson]

Originally posted by meat
My closest friend just purchased a Mercedes-Benz SLR McLaren super sports car i'm chrecking out the Jetta's.

Hey I've got a Jetta. We can make it the official car of the under-compensated studio owner

[Jan Folkson]

Originally posted by Dave Martin
It even embarrasses ME how little I paid myself last year.

We're SUPPOSED to get paid????

[jonnyclueless]

I usually make more than the owner of the studio I primarily work out of. And it's not like I make a lot of money.

[Brad Blackwood]

Originally posted by Bob Olhsson
John Fry at Ardent in Memphis is one of very few original owners from back in "the day" and none that I'm aware of ever left the studio business willingly.

And it doesn't hurt that the studio neither increases nor diminishes his fortune...

He's in it for passion, not for money. No one who really wants to make serious money gets into the studio biz.

[C.Lambrechts]

Originally posted by Brad Blackwood
No one who really wants to make serious money gets into the studio biz.

ugh.

[crna59]

Originally posted by Jan Folkson
Hey I've got a Jetta. We can make it the official car of the under-compensated studio owner

And I have an SL55...
My day job I practice anesthesia!

Regards,
Bruce

[seriousfun]

Originally posted by alphajerk
thats when you say "its not our policy for allowing deliquent payments from you... so pay it now or pay more later" [and hit them with 20% interest after 6 months... or make interest raise by 5% each month its late.]

Unfortunately, that customer will take their business elsewhere, whether you charge interest or take them to court. Supply and demand.

[sofa]

Lately I've come to realize that through the last few years I've been on a crazy race buying more and more equipment not even thinking if the client would appreciate the difference or at least be willing to pay for it.And you know what?
I've made the decision not to buy any more gear this 2005 and invest all income on 2 things:marketing and vacation.
Anyone else on a situation like this?

[studjo]

no



































































he man this is gearslutz after all

[johnnyblotter]

Originally posted by alphajerk
thats when you say "its not our policy for allowing deliquent payments from you... so pay it now or pay more later" [and hit them with 20% interest after 6 months... or make interest raise by 5% each month its late.]

The problem here is that the big corporation just doesn't care about paying you interest. Do you have the muscle to drag 'em to court and duke it out with their lawyers? Probably not. Because of the market, if you don't like waiting to get paid, they'll just find someone else.

And they probably won't give a crap how much work YOU delivered on time, during a crunch, and the quality of your work...the things you'd think actually matter in a business relationship.

[johnnyblotter]

oops, serioufun kind of beat me to that one...but I'm seconding it, anyway.

[sismundi]

Originally posted by Oldone
Recording is a tax write off business. That's where the ultimate payment lies. So pull out those calculators and pens. That is where the high life resides.

I've never understood the tax write off argument. You don't need to be an accountant to see the implausibilty of it.

For example say your marginal corporate tax rate is 25%. Then on each dollar you lose your tax benefit is 25¢ on the dollar.

A metaphysical impossiblitity to make money this way.

The only possible way tax loss can ever be a net gain is if you buy a business with unrealised tax loss for less than the total value of the loss and your current business is profitable .

E.g. the aggregated tax loss is $100,000 and you buy the business for $75,000 and gain $25,000 from the tax loss you apply against your overall profitable business (for simplicity, ignoring any salvaged capital assets from the business). Profitable being the keyword here. I'm not even sure accounting rules allow this any more.

But you would never start an intentionally money losing business for the tax write-off. That's absurd. For each dollar you lose, you only get 25¢ back in tax benefit.

[Oldone]

I think the part you're missing is that the studio write off is applied against another source of income, called a day job. It's not viable as a stand alone model.

[not_so_new]

Okay so this is mostly a rhetorical question (I know most of the answers) but… has anyone ever stopped to think of WHY studios don't make money??

I know a few guys how have a passion for old cars (I am one of them), one guy is working on my 66 Mustang right now . He owns shop space, he has employee payroll, lots of money invested in equipment, a limited client base but he still makes money doing what he loves.

Why should recording be any different? And I am not saying that with sarcasm, that is a real question that I have. Bob said earlier in this thread that everyone he knows has closed up shop at one time or another but I just don't understand why there can't be a viable business model that a studio can follow to stay in the black and make some money for the owner.

Again part of this is a rhetorical question, I know that all studios have a limited client base and large overhead so don't think that I am a wide eyed young buck. I just have never been able to figure out were to cut the fat from a studio to make it profitable. Is the key owning your space free and clear so you don't have a mortgage?? Is the key to have less equipment?? I just have a feeling that something is missing from the business model some ware and I don't know what that is. Of course wiser people than me have searched for longer than I have and have walked away from it without a solution so….

[Jan Folkson]

Here's a simple answer to the question posted above. In 1989 a major studio here in NYC was between $150 and $200 per hour. In 2005 the rates are LOWER!

[Bob Olhsson]

Chris Stone told me that he never bought anything new for the Record Plant that was available used!

When I started out around 1963, 4 track time at United Sound was $60 an hour. In San Francisco, 16 track time at Wally Heider's in 1972 was around $125 an hour but all outboard gear beyond the 3 or 4 1176s in the rack was an extra daily rental comparable to what you'd pay today.

In the mid '70s a loophole appeared in the tax laws that allowed you to take an investment tax CREDIT for the appraised value of a motion picture or record album. This meant instead of paying Uncle Sam, you could use the money to invest in something wild and speculative. A few gear pimps jumped on the bandwagon and started selling doctors and lawyers turnkey "tax shelter" studios. These new studios could charge outrageous rates to their owner's bands and the owner could literally put all of the money in their pocket rather than paying it in taxes. This glitch also funded Lucas, Spielberg Cappolla and numerous other young film producers.

Around 1978 the hole got plugged by Congress and the doctors and lawyers all dumped their studios. Many older studios suddenly found themselves in competition with their former chief engineer who had literally paid pennies on the dollar for the facility.

The studio business never really recovered.

[hollywood_steve]

Here's a simple answer to the question posted above. In 1989 a major studio here in NYC was between $150 and $200 per hour. In 2005 the rates are LOWER!


Hell, I've seen posts where guys claimed to have worked at places that charged more in the early 70s than comparable places charge now! Please remember that a new car cost between $2k (Beetle) and $4k(full size American boat) back then, so car manufacturers are now able to charge about TEN Times what they did in the early 70's.

I can't think of any other business that comes close to our sort of horrible situation. But a LARGE part of the blame can be placed squarely on ourselves - there are now less car manufacturers then there were in the early 70's, while there are many tens of thousands more recording studios.